Morningstar Advisor - April/May 2009 - 14

10 Questions Accounting for His Success By Jerry Kerns On Feb. 5, we asked Charlie Dreifus to answer 10 Questions. 1 Congratulations on being named Domestic-Stock Manager of the Year. How have you achieved your good record? 2 As a value-oriented stock-picker, with stock prices far off their highs, is this a time of optimism for you? Charlie Dreifus Royce Special Equity RYSEX Relatively, Charlie Dreifus blew the doors off the competition in 2008. His fund, Royce Special Equity, beat the S&P 500 by 17 percentage points and the small-value category by 13 percentage points. But he doesn’t view the year as a success. Far from it. For a manager whose first ambition is to produce a positive return, losing 19.6% is hard to swallow. “It’s a big absolute negative number,” Dreifus says. “People come to me for defensive action, and historically, I’ve defended well. You could argue I defended well last year, but I got damaged. It was just a bad year.” So imagine Dreifus’ surprise when he got a call from Morningstar informing him that he was named 2008 Domestic-Stock Manager of the Year. But as much as Dreifus was able to limit losses last year, he was honored more for his body of work. His long-term performance and stewardship are excellent. (He has more than $1 million of his own money in the fund.) Few managers are able to weather down markets as well as Dreifus, and although he’ll rarely lead in small-cap rallies, he makes enough of the upside to stay far ahead of rivals through full market cycles. Since its inception in 1998, the fund has earned three times the annual returns of its category peers. To find his companies, Dreifus does some heavy lifting. An accountant at heart, he pores through balance sheets with a critical eye, looking for cash-rich companies selling for less than they’re worth. He fixes on what he can see. “Too often investors fall for a story or future something,” Dreifus says. “My way of investing is on the here and now. I don’t pay for futures.” 3 People like to call you an “accounting cynic.” What do they mean by that? 4 Why do so many of your stocks become takeover candidates? 5 What do you love about investing in small companies? 6 What was the first stock you ever bought? 7 Is this the toughest market you’ve seen? 8 Since the crisis began, are you placing greater importance on certain metrics of yours? 9 Where in the market are your metrics leading you? 10 Special Equity is not for everyone. Who should invest in the fund? 14 Morningstar Advisor April/May 2009

Morningstar Advisor - April/May 2009

Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2009

Morningstar Advisor - April/May 2009
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
Did Diversification Fail Investors?
Accounting for His Success
The Classics
Investment Briefs
A Multiple-Lens Approach to Analysis
Where Leverage Lurks
Guide to Finding Hidden Risks
How Leveraged ETFs Compound the Misery
Get Rid of the Dead Weight
Grounded Manager
Investors Should Mind Their Tails
Four Picks for the Present
The Future of Big Pharma
Yield Your Clients Can Use
Wide Moats, Good Stewardship: A Potent Bear-Market Combination
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
New at Morningstar
To Beat the Devil
Morningstar Advisor - April/May 2009 - Intro
Morningstar Advisor - April/May 2009 - Morningstar Advisor - April/May 2009
Morningstar Advisor - April/May 2009 - Cover2
Morningstar Advisor - April/May 2009 - 1
Morningstar Advisor - April/May 2009 - 2
Morningstar Advisor - April/May 2009 - Contents
Morningstar Advisor - April/May 2009 - 4
Morningstar Advisor - April/May 2009 - 5
Morningstar Advisor - April/May 2009 - New on MorningstarAdvisor.com
Morningstar Advisor - April/May 2009 - 7
Morningstar Advisor - April/May 2009 - 8
Morningstar Advisor - April/May 2009 - Letter from the Editor
Morningstar Advisor - April/May 2009 - Contributors
Morningstar Advisor - April/May 2009 - 11
Morningstar Advisor - April/May 2009 - Did Diversification Fail Investors?
Morningstar Advisor - April/May 2009 - 13
Morningstar Advisor - April/May 2009 - Accounting for His Success
Morningstar Advisor - April/May 2009 - 15
Morningstar Advisor - April/May 2009 - 16
Morningstar Advisor - April/May 2009 - The Classics
Morningstar Advisor - April/May 2009 - 18
Morningstar Advisor - April/May 2009 - 19
Morningstar Advisor - April/May 2009 - Investment Briefs
Morningstar Advisor - April/May 2009 - 21
Morningstar Advisor - April/May 2009 - 22
Morningstar Advisor - April/May 2009 - 23
Morningstar Advisor - April/May 2009 - 24
Morningstar Advisor - April/May 2009 - A Multiple-Lens Approach to Analysis
Morningstar Advisor - April/May 2009 - 26
Morningstar Advisor - April/May 2009 - 27
Morningstar Advisor - April/May 2009 - 28
Morningstar Advisor - April/May 2009 - 29
Morningstar Advisor - April/May 2009 - 30
Morningstar Advisor - April/May 2009 - 31
Morningstar Advisor - April/May 2009 - Where Leverage Lurks
Morningstar Advisor - April/May 2009 - 33
Morningstar Advisor - April/May 2009 - 34
Morningstar Advisor - April/May 2009 - 35
Morningstar Advisor - April/May 2009 - Guide to Finding Hidden Risks
Morningstar Advisor - April/May 2009 - 37
Morningstar Advisor - April/May 2009 - 38
Morningstar Advisor - April/May 2009 - 39
Morningstar Advisor - April/May 2009 - How Leveraged ETFs Compound the Misery
Morningstar Advisor - April/May 2009 - 41
Morningstar Advisor - April/May 2009 - Get Rid of the Dead Weight
Morningstar Advisor - April/May 2009 - 43
Morningstar Advisor - April/May 2009 - 44
Morningstar Advisor - April/May 2009 - 45
Morningstar Advisor - April/May 2009 - 46
Morningstar Advisor - April/May 2009 - 47
Morningstar Advisor - April/May 2009 - 48
Morningstar Advisor - April/May 2009 - 49
Morningstar Advisor - April/May 2009 - Grounded Manager
Morningstar Advisor - April/May 2009 - 51
Morningstar Advisor - April/May 2009 - 52
Morningstar Advisor - April/May 2009 - 53
Morningstar Advisor - April/May 2009 - Investors Should Mind Their Tails
Morningstar Advisor - April/May 2009 - 55
Morningstar Advisor - April/May 2009 - 56
Morningstar Advisor - April/May 2009 - 57
Morningstar Advisor - April/May 2009 - Four Picks for the Present
Morningstar Advisor - April/May 2009 - 59
Morningstar Advisor - April/May 2009 - 60
Morningstar Advisor - April/May 2009 - The Future of Big Pharma
Morningstar Advisor - April/May 2009 - 62
Morningstar Advisor - April/May 2009 - 63
Morningstar Advisor - April/May 2009 - Yield Your Clients Can Use
Morningstar Advisor - April/May 2009 - 65
Morningstar Advisor - April/May 2009 - Wide Moats, Good Stewardship: A Potent Bear-Market Combination
Morningstar Advisor - April/May 2009 - 67
Morningstar Advisor - April/May 2009 - Mutual Fund Analyst Picks
Morningstar Advisor - April/May 2009 - 69
Morningstar Advisor - April/May 2009 - 70
Morningstar Advisor - April/May 2009 - 71
Morningstar Advisor - April/May 2009 - 50 Most Popular Equity ETFs
Morningstar Advisor - April/May 2009 - 73
Morningstar Advisor - April/May 2009 - Undervalued Stocks
Morningstar Advisor - April/May 2009 - 75
Morningstar Advisor - April/May 2009 - 76
Morningstar Advisor - April/May 2009 - 77
Morningstar Advisor - April/May 2009 - 78
Morningstar Advisor - April/May 2009 - New at Morningstar
Morningstar Advisor - April/May 2009 - To Beat the Devil
Morningstar Advisor - April/May 2009 - Cover3
Morningstar Advisor - April/May 2009 - Cover4
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